Unhelpfully, the four headline inflation figures produced by the ONS produce quite different numbers. Politicians and others are not above selecting whichever gives them the answer they want. There are different ways to measure inflation, but having one headline measure which best tells us how prices across the economy have been rising would be hugely valuable. The nearest we are likely to get to such a measure is CPIH: the consumer prices index, including owner occupiers’ housing costs. It needs fixing. It currently has its status as a “national statistic” withdrawn because of problems with the housing cost data. But that can be fixed. It can’t do everything. No measure can. And it should be complemented by more information than we have now about how the costs facing specific groups (like pensioners and workers) are changing. But it is likely to be the best overall measure we can get.
Andrew Sentance is senior economic adviser to PwC and is a former Monetary Policy Committee member, says No
Paul Johnson’s review was set up to address the proliferation of and confusion about UK measures of inflation. But his recommendation threatens to make the situation worse rather than better. It is only recently that the consumer price index (CPI) replaced the retail prices index (RPI) as our main measure of inflation. It’d undermine public confidence if we now shift to another measure – CPIH – which we cannot even measure properly. The status of CPIH has been downgraded by the ONS and it is not an official national statistic. CPIH would also not be consistent with the way our main trading partners in Europe measure inflation. It’s true that the current CPI does not include house purchases by owner-occupiers, though it includes many other housing-related costs. But measuring owner-occupier housing costs has been controversial for years, and CPIH does not offer a satisfactory long-term solution.